TaxTMI 
TaxTMI 
2025 (3) TMI 1632
X X X X Extracts X X X X
X X X X Extracts X X X X
....ted to sale of immovable property and hence, not leviable to service tax. Also, the amendment brought to Section 65(105)(zzzh) in terms of an 'Explanation' inserted w.e.f. 01.07.2010 was not applicable to them since the projects were completed prior to the above amendment, hence, they were not liable to pay service tax. The Commissioner in the impugned order held that the insertion of 'Explanation' to Section 65(105)(zzzh) w.e.f. 01.07.2010 is only clarificatory in nature and hence, applicable to the period of dispute. Further, referring to the CBEC Circular No.108/02/2009-ST dated 29.01.2009 relied upon by the appellant rejected their plea that the construction service was for self-service. Accordingly, demands were confirmed for projects already completed for the period April 2008 to March 2012, demands were also confirmed pertaining to landowner's share for the above period along with interest under the proviso to the Section 73(1) and 73(2) of the Finance Act, 1994. Penalty was imposed under Section 70, 77, and 78. Aggrieved by the above order the appellant is in appeal before us. 3. The Learned Chartered Accountant (CA) submits that the issues raised in the show-cause notic....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... as both the parties are developing the projects jointly with a profit motive. On completion of project, the share of flats as agreed with landowners are transferred. Appellant contends that advances received in relation to construction service prior to 01.07.2010 is clearly not liable to service tax as per 'Explanation' to Section 65(105)(zzzh). Further, all Joint Development Agreements (JDA) executed with landowners except Pinnacle (own land) are prior to 01.07.2010, hence would be outside the purview of service tax. Drawing analogy from Circular No.108/02/2009 dated 29.01.2009, sale deed is executed only after completion of construction and only on execution of sale deed, ownership of the property is transferred to the land owners. Accordingly, all services provided by Appellant until execution of sale deed would be in nature of self-service and would not attract service tax. Also places reliance on Circular No.151/2/2012-ST dated 10.02.2012, wherein it reiterates the clarification in the above mentioned Circular that construction services prior to 01.07.2010 is not liable to service tax. Further, this Circular also clarifies that construction services provided by the builder/de....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Learned Authorised Representative on behalf of the Revenue reiterating the findings of the original authority submitted that the demands are to be sustained. Revenue also submitted that since the appellant had already collected the service tax from their customers and have remitted the same, the demand of tax needs to be sustained. 5. Heard both sides. The issues to be decided are whether: i. Appellant is liable to pay service tax on the income received from construction service for the period April 2008 to March 2012; and ii. Appellant is liable to pay service tax on the value of the land owner's share during the said period. 6. With regard to the issue whether service tax is liable to be paid on construction services, the Commissioner in the impugned order holds that the 'Explanation' to Section 65(105)(zzzh) introduced w.e.f. 01.07.2010 was only clarificatory in nature and hence, liable to pay tax in terms of the Section 65(105)(zzzh) read with the 'Explanation'. Further, he holds that the CBEC's Circular No.108/02/2009-ST dated 29.01.2009 in terms of clause-3 of the Circular with regard to tax on flat sold after the date of completion certificate, the Co....
X X X X Extracts X X X X
X X X X Extracts X X X X
....reement to sell, the nature of transaction is not a service but that of a sale. Where a buyer enters into an agreement to get a fully constructed residential unit, the transaction of sale is completed only after complete construction of the residential unit. Till the completion of the construction activity, the property belongs to the builder or promoter and any service provided by him towards construction is in the nature of self service. It has also been argued that even if it is taken that service is provided to the customer, a single residential unit bought by the individual customer would not fall in the definition of 'residential complex' as defined for the purposes of levy of service tax and hence construction of it would not attract service tax. 3. The matter has been examined by the Board. Generally, the initial agreement between the promoters/builders/developers and the ultimate owner is in the nature of 'agreement to sell'. Such a case, as per the provisions of the Transfer of Property Act, does not by itself create any interest in or charge on such property. The property remains under the ownership of the seller (in the instant case, the promoters/builders/deve....
X X X X Extracts X X X X
X X X X Extracts X X X X
....om the issues referred by the field formations, important ones have been identified model wise, examined and clarified as follows : 2.1 Tripartite Business Model (Parties in the model : (i) landowner; (ii) builder or developer; and (iii) contractor who undertakes construction) : Issue involved is regarding the liability to pay service tax on flats/houses agreed to be given by builder/developer to the land owner towards the land /development rights and to other buyers. Clarification : Here two important transactions are identifiable : (a) sale of land by the landowner which is not a taxable service; and (b) construction service provided by the builder/developer. The builder/developer receives consideration for the construction service provided by him, from two categories of service receivers: (a) from landowner: in the form of land/development rights; and (b) from other buyers: normally in cash. (A) Taxability of the construction service : (i) For the period prior to 1-7-2010: construction service provided by the builder/developer will not be taxable, in terms of Board's Circular No. 108/2/2009-S.T., dated 29-1- 2009. (ii) For the period ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 11.02.2010 18-Jun-13 In Progress 8. The Commissioner at Para 25.7 of the impugned order observed that the appellant had neither submitted the completion certificate to the officers of audit during the course of audit nor during his submission to reply to show-cause notice in support of his claim. Hence, the same is remanded to the original authority to verify the completion certificates and if it is found that these projects are completed prior to 01.07.2010, the question of liability to service tax does not arise. The Circular No. 151/2/2012-S.T., dated 10-2-2012 relied upon by the appellant also observed as follows: (ii) For the period after 1-7-2010, construction service provided by the builder/developer is taxable in case any part of the payment/development rights of the land was received by the builder/ developer before the issuance of completion certificate and the service tax would be required to be paid by builder/developers even for the flats given to the land owner. In view of the above, any payments received on or after 01.07.2010 are liable for service tax. With regard to 'El Palazo' project as already held that they are not liable to tax, the land....